Carbon6 closes $88 million CAD Series A to consolidate “fragmented” e-commerce software space

Carbon6
Carbon6 co-founders Kazi Ahmed (left), Justin Cobb (centre), and Naseem Saloojee (right).
Starting with Amazon, Carbon6 aims to buy and build more tools for marketplace sellers.

Toronto-based e-commerce software aggregator Carbon6 sees an opportunity to bring more order and sophistication to the “fragmented” ecosystem of tools for online sellers.

“What we saw here was an opportunity to bring together a series of tools that supported that professional seller, in a way that others hadn’t done in this market,” Carbon6 co-founder and CEO Justin Cobb told BetaKit in an interview.

“It’s a fairly unique mousetrap that we built here.”
-Naseem Saloojee, Carbon6
 

Since its launch in April 2021 during the pandemic-driven e-commerce boom, the startup has made significant headway on this front, acquiring 16 companies in the past 16 months.

Now, armed with $88 million CAD ($66 million USD) in Series A financing, Carbon6 plans to buy, build, and grow even more e-commerce software companies, including larger, more mature firms.

The round, which marks Carbon6’s first institutional funding, is a sizable raise during more challenging venture capital and e-commerce market conditions. The Series A is also a big jump compared to the approximately $14 million CAD ($9 million USD) in funding that Carbon6 had previously raised from undisclosed angels, high-net-worth individuals, family offices, and the startup’s founding team. Carbon6’s Series A round bringing the company’s total funding to about $102 million CAD ($75 million USD).

Carbon6’s Series A round consisted of a mix of equity and debt, though the company refused to share the breakdown. The round was led by White Star Capital with support from Kale Investment Fund, Benevolent Capital, and other undisclosed investors. MidCap Financial, an affiliate of Apollo Global Management, also participated, providing the debt and making an equity investment in Carbon6 as part of the round.

When asked by BetaKit, Carbon6 said it would not share the split between equity versus debt because it wants to avoid providing any additional insight into its merger and acquisition (M&A)-focused approach to prospective competitors.

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“It’s a fairly unique mousetrap that we built here,” Carbon6 co-founder Naseem Saloojee told BetaKit in an interview.

Acknowledging the size of the round during what has become a more subdued venture funding environment as economic conditions have worsened, White Star Capital partner Eddie Lee told BetaKit that because Carbon6’s business is “partly driven by acquiring subscale software companies and growing them, it was important to equip the team with sufficient equity and debt capital early on.”

In recent years, Lee noted that e-commerce sales volume has moved away from digitally native direct-to-consumer brands and toward major marketplace platforms like Amazon and Shopify. But despite Amazon’s “rich and robust seller ecosystem,” Lee argued there is “a distinct lack of modern software tools servicing the e-commerce entrepreneurs within it.”

Enter Carbon6, which claims to be “a leading software suite for the Amazon marketplace.” According to Cobb and Saloojee, the e-commerce software ecosystem consists of lots of single-point solutions that don’t communicate with each other. “Your typical e-commerce seller has between eight and 15 different tabs open on their browser,” said Saloojee. “There is a simplification that’s needed that sellers desire.”

Carbon6 acquires, builds, and integrates software solutions for e-commerce merchants selling on Amazon, while also providing those same merchants with educational programs and support to help them grow. Since, according to Cobb, Amazon only truly opened APIs to developers in recent years, the market is still relatively new, and because of this, “a large gap in sophistication” exists that Carbon6 sees an opportunity to fill. Carbon6 focuses specifically on catering to professional sellers, which the startup’s founders believe have not received the level of enterprise support they deserve up to this point.

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Cobb and Saloojee teamed up with Kazi Ahmed to launch Carbon6 during the COVID-19-fuelled rise of online commerce. The startup has been rather busy since then, acquiring over a dozen e-commerce companies including inventory management and forecasting software firm SoStocked and ad revenue management tool PPC Entourage.

In all but one of these cases, the founders of the acquired businesses stuck with Carbon6 post-acquisition, giving the company a healthy roster of Amazon ecosystem experts that Cobb believes will help Carbon6 make better decisions from the seller’s perspective.

Acquiring e-commerce brands is a well-established pursuit, featuring firms like Emerge Commerce, Moonshot Brands, Thrasio, Perch, SellerX, Razor Group, and Una Brands—a White Star Capital portfolio company. But according to Lee, the e-commerce software aggregator space is “nascent.” Rather than buy brands themselves, e-commerce software aggregators consolidate companies that build tools for online sellers.

While it may be an emerging space, Carbon6 is not the only company “solving the software challenge” in marketplace e-commerce. Some of the firms consolidating e-commerce tools, like WeCommerce, are focused on platforms like Shopify, while others, like Carbon6, focus on Amazon. Since the companies targeting this sector are predominantly early-stage, Lee believes that “executing on both growth and profitability will be an important differentiating factor for [Carbon6 in] the near term.”

Though all of the tools Carbon6 has acquired are available to sellers individually, the startup sees opportunity in packaging them together and building more interconnectivity between them.

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For the time being, Carbon6’s focus remains on Amazon. But the startup’s ambitions don’t stop there. Saloojee described Amazon’s platform as “the perfect place to build an end-to-end suite that can be taken to other places.”

In recent months, the e-commerce sector’s growth has slowed amid a rebound in demand for in-person shopping and the broader macroeconomic downturn, impacting e-commerce firms like Shopify and Amazon, as well as companies that aggregate online sellers using them.

However, Carbon6’s leadership team says it isn’t concerned about these conditions. Saloojee described the current environment as “a momentary setback,” emphasizing that the startup remains bullish on e-commerce over the long run.

“We’re in the top of the second inning in e-commerce and could not be more excited to be positioned where we are.”
-Justin Cobb, Carbon6
 

“We’re in the top of the second inning in e-commerce and could not be more excited to be positioned where we are,” said Cobb. “We’re focused on building a business with great fundamentals that will become a stalwart in the space. The day-to-day, or month-to-month, or even year-to-year conditions are not something that we preoccupy ourselves with too much.”

Lee acknowledged that while e-commerce growth is slowing, total e-commerce volume continues to grow, and has plenty of room left to keep doing so.

“Despite the enormous size of e-commerce, goods sold online still represent less than a quarter of total retail sales,” said Lee. “We believe that more goods will continue to be sold and bought online in the future and that a larger share of merchants will be launching their online business on major marketplaces like Amazon and Shopify.”

Given this forecast, Lee believes that “as one of the only platforms on the market that offers end-to-end support for sellers, Carbon6 is very well positioned to help these entrepreneurs build the best version of their online businesses.”

Feature image courtesy Carbon6.

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling and breaking Canadian tech and innovation stories. His coverage is more complete than his moustache.

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